AccorHotels Is Still Struggling to Make Onefinestay and John Paul Profitable

Deanna Ting, Skift

- Oct 18, 2018 2:25 pm

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The first step to making things right is to admit things are wrong, followed by figuring out how to make things right again. At this point, we’re not sure we know how AccorHotels wants to fix its problems with Onefinestay and John Paul, but at least it admits something is wrong.

During the company’s third quarter call on Thursday, AccorHotels Deputy CEO and CFO Jean-Jacques Morin noted in prepared remarks that “Onefinestay and John Paul posted negative growth following the strategic review we initiated last summer.” Accor bought both companies in 2016.

When pressed by analysts to divulge more information or details as to what went wrong with those businesses during a third quarter earnings call, Morin didn’t have much to say, except to allude to integration issues.

“It is the usual story about how a new business is being integrated in the company and as probably being too greedy and what we try to do with that company and integrating them too fastly, and pushing them into too many geographies and too many directions,” he said. “I think I would summarize it like that. So, what we’re doing right now is making sure that we are focused on really making money and what we managed well, which is why you see the negative revenue of Q3.”

In July, Accor had said its expansion plans for both businesses relied on finding “synergies and scaling plans” with its hotels business and these had “not been delivered as planned.”

“You need to make sure they are going to remain autonomous,” Bazin said. “If you impose the non-agile side of Accor, they are going to die and they are going to suffocate. I need to respect them. I need to make sure they remain independent, but I also want to make sure I take form them what I need.

“[It’s a] very fine equilibrium between autonomous and what I need. We’ve made 12 to 17 investments,” he continued, “and I really believe that 20 percent of them will not work. Wrong equilibrium, team, or idea, or maybe too late. Twenty to 50 percent will be remarkable, and a third will be average. This is the name of the game when you enter into unknown territories.”

Bazin was not on the call Thursday. Morin, however, seemed to affirm during the call that AccorHotels isn’t about to give up on these two new businesses just yet.

“Our strategy has not changed,” he said. “We want to do that with private rental. We want to move ahead with John Paul. And at this stage, it’s too early to tell you what our solution is, but that’s what they would say at that point. The other thing that I would like to highlight, as you know, is that despite being small numbers, this is important for us.”

All in all, Morin also confirmed that for the full year of 2018, he estimated that AccorHotels would see a total $28.7 million (25 million euros) loss for its new business unit.

However, excluding Onefinestay and John Paul, the majority of AccorHotels’ new business investments are performing well. Total revenue for the unit during the third quarter was $45.9 million (40 million euros).